Feb 8 Howdy!

Hey everyone, just wanted to pop in and let you know I’m trading VERY small. Just 1-2 lots of #Fuzzy . Mostly shorts. Fuzzies are very expensive now. It helps to hedge them since hedges are also expensive (credit). But hedging slows them down considerably in movement. I like to get out with 50-100% gains. Where I’m doing best now is scalping /NQ.

I’ve mentioned my ” #Augen Spike Code” in the past (From Jeff Augen’s book The Volatility Edge in Options Trading). It translates price action into standard deviations. It helped me find a crash indicator different from what everyone else was viewing. But I also found an important bottom indicator is when there are 3-out of-5 daily bars with 1-standard deviation up moves. .99 doesn’t count, must be over 1.0. Going back in time w/ the indicator I found anything less than 3-in-5 led to shallow false or short term rallies. So on rally days I’m watching and counting those bars.
Sue

Let me see if I understand this, just installed it on a daily SPX chart. I see 3 of 5 bars less then -2 SD’s does that mean we will reverse?
Thx for this.

smasty
2:36 pm on Thursday, February 8, 2018

Ignore down moves on the indicator now, except for curiosity sake. What you want when we are having wild rallies, is to hold firm on going all in until you see 3 of 5 consecutive bars are + 1 standard deviation or more (green bars).

Yes, daily chart only. Here’s an example to look at on SPX: Scroll back to the double bottom crash 8/24/15. You’ll see at the first low, there’s only 2 1-standard deviation up bars, then the rally breaks, but at the 2nd low, you’ll see 3 1-standard deviation up bars, and the rally is good for 145 points.

Does the green part of the bar have to be over 1, or can it be the white part of the bar, too?

smasty
5:30 am on Friday, February 9, 2018

The filled bar indicates the close, the white dot indicates the extreme for the day. It must CLOSE above 1.0, absolutely no less, even if it’s .9999.
By the way, my crash indicator is when, in a rolling month, there are 7 or more 1SD (or higher) green bars. It indicates panic buying driving up price. I went back in history and found 7-8 were predictors of correction (I actually found zero instances of a reading above 8 back to 87). We hit 9 bars before this correction. So my new trading rule: Lighten up at 6, flatten at 7, start layering shorts at 8.

Also looking at bar behavior relative to the white dot is useful too, during rallies, most red bars retreat from their white dot, but when trouble comes the red bars fill to the white dot (meaning closing on the low). You can obviously see the same thing with regular price bars, it’s just a different way of viewing.

I don’t really see white “dots”. I show bars that are green with the highest part of the bar being white. Is that white part what you refer to as “dots?” And you’re saying it is the green part that MUST be 1.0 or higher for your signal to work?